CA Foundation · Accounting · Inventories
Which statement about the use of cost formulas under AS 2 is correct?
AS 2 allows an entity to use different cost formulas for inventories of a different nature or use, while items of similar nature and use should follow the same formula. LIFO is not permitted, and weighted average may be periodic or moving.
- AA entity must use the same cost formula for all inventories regardless of nature or use
- BLIFO is an acceptable cost formula for interchangeable items
- CAn entity may use different cost formulas for inventories having a different nature or useCorrect
- DWeighted average cannot be applied on a periodic basis
Explanation
AS 2 permits different cost formulas for inventories with different nature or use, though the same formula should apply to items of similar nature and use. LIFO is not permitted under AS 2, and weighted average may be computed periodically or on each receipt.
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